Brodie Co. uses a standard job cost system and a denominator volume of 25,000 direct labor hours for allocating overhead. The actual output was 12,000 units, which cost $185,700 for direct labor (23,000 hours), $27,525 for variable overhead, and $136,400 for fixed overhead. The standard variable overhead per unit is $2 (2 hours @ $1 per hour), and the standard fixed overhead per unit is $10 (2 hours @ $5 per hour). All variances are immaterial and are closed to Cost of Goods Sold at the end of the period. The entry to close the variable overhead variances includes a
A) Credit to the variable overhead spending variance for $4,525
B) Credit to work in process for $24,000
C) Credit to the variable overhead efficiency variance for $1,000
D) Debit to Cost of Goods Sold for $5,525

Question

Quizplus · Accepted Answer

Since all variances are immaterial and are closed to Cost of Goods Sold at the end of the period, the entry to close the variable overhead variances would only include a credit to the variable overhead spending variance for the total amount of the variance ($4,525). The other options are incorrect as they do not accurately reflect the closing of the variances.

Brodie Co Uses a Standard Job Cost System and a Denominator